Tag Archives: business use

Pointe Tapatio Community Association v. Lanye C. and Devin E. Willey

Posted on by

Case Summary

Case ID 19F-H1919044-REL
Agency ADRE
Tribunal OAH
Decision Date 2019-05-07
Administrative Law Judge Thomas Shedden
Outcome partial
Filing Fees Refunded $0.00
Civil Penalties $500.00

Parties & Counsel

Petitioner Pointe Tapatio Community Association Counsel Lauren Vie
Respondent Lanye C. Wilkey and Devin E. Wilkey Counsel Joseph Velez

Alleged Violations

CC&R Article 3, section 3.1

Outcome Summary

The ALJ found that the Respondents violated the CC&Rs by operating a business that created traffic and parking. The Respondents were ordered to cease business operations and pay a $500.00 civil penalty. The Petitioner's request for a refund of its filing fee was denied.

Why this result: Petitioner's request for refund of the filing fee was denied because they cited no authority showing that the refund was within the tribunal’s authority.

Key Issues & Findings

Violation of Residential Use covenant prohibiting traffic/parking generation by business

The Petitioner HOA alleged that the Respondents, co-owners of the unit, violated CC&Rs Article 3, section 3.1 by operating a payroll processing company out of the unit. The ALJ found that the business required two employees to drive to the unit daily, thereby creating traffic and parking, which clearly and unambiguously violates the CC&R provision prohibiting non-residential use that creates traffic or parking.

Orders: Respondents were ordered to cease business operations at the unit (720 E. North Lane, Unit 1) within thirty-five days to comply with CC&R Article 3, section 3.1, and pay a civil penalty of $500.00 to the Department of Real Estate within sixty days. The Petitioner's request for refund of the filing fee was denied.

Filing fee: $0.00, Fee refunded: No, Civil penalty: $500.00

Disposition: petitioner_win

Cited:

  • ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
  • ARIZ. ADMIN. CODE § R2-19-119
  • BLACK’S LAW DICTIONARY 1373 (10th ed. 2014)
  • Johnson v. The Pointe Community Association, 205 Ariz. 485, 73 P.3d 616 (App. 2003)
  • Powell v. Washburn, 211 Ariz. 553, 556 ¶ 9, 125 P.3d 373, 376 (2006)
  • Grubb & Ellis Management Services, Inc. v. 407417 B.C., L.L.C., 213 Ariz. 83, 138 P.3d 1210 (App. 2006)
  • ARIZ. REV. STAT. § 32-2199.02
  • ARIZ. REV. STAT. section 32-2199.04
  • ARIZ. REV. STAT. section 41-1092.09

Analytics Highlights

Topics: HOA, CC&Rs, Business Use, Home Business, Parking, Traffic, Civil Penalty
Additional Citations:

  • ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
  • ARIZ. ADMIN. CODE § R2-19-119
  • BLACK’S LAW DICTIONARY 1373 (10th ed. 2014)
  • Johnson v. The Pointe Community Association, 205 Ariz. 485, 73 P.3d 616 (App. 2003)
  • Powell v. Washburn, 211 Ariz. 553, 556 ¶ 9, 125 P.3d 373, 376 (2006)
  • Grubb & Ellis Management Services, Inc. v. 407417 B.C., L.L.C., 213 Ariz. 83, 138 P.3d 1210 (App. 2006)
  • ARIZ. REV. STAT. § 32-2199.02
  • ARIZ. REV. STAT. section 32-2199.04
  • ARIZ. REV. STAT. section 41-1092.09

Pointe Tapatio Community Association v. Lanye C. and Devin E. Willey

Posted on by

Case Summary

Case ID 19F-H1919044-REL
Agency ADRE
Tribunal OAH
Decision Date 2019-05-07
Administrative Law Judge Thomas Shedden
Outcome partial
Filing Fees Refunded $0.00
Civil Penalties $500.00

Parties & Counsel

Petitioner Pointe Tapatio Community Association Counsel Lauren Vie
Respondent Lanye C. Wilkey and Devin E. Wilkey Counsel Joseph Velez

Alleged Violations

CC&R Article 3, section 3.1

Outcome Summary

The ALJ found that the Respondents violated the CC&Rs by operating a business that created traffic and parking. The Respondents were ordered to cease business operations and pay a $500.00 civil penalty. The Petitioner's request for a refund of its filing fee was denied.

Why this result: Petitioner's request for refund of the filing fee was denied because they cited no authority showing that the refund was within the tribunal’s authority.

Key Issues & Findings

Violation of Residential Use covenant prohibiting traffic/parking generation by business

The Petitioner HOA alleged that the Respondents, co-owners of the unit, violated CC&Rs Article 3, section 3.1 by operating a payroll processing company out of the unit. The ALJ found that the business required two employees to drive to the unit daily, thereby creating traffic and parking, which clearly and unambiguously violates the CC&R provision prohibiting non-residential use that creates traffic or parking.

Orders: Respondents were ordered to cease business operations at the unit (720 E. North Lane, Unit 1) within thirty-five days to comply with CC&R Article 3, section 3.1, and pay a civil penalty of $500.00 to the Department of Real Estate within sixty days. The Petitioner's request for refund of the filing fee was denied.

Filing fee: $0.00, Fee refunded: No, Civil penalty: $500.00

Disposition: petitioner_win

Cited:

  • ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
  • ARIZ. ADMIN. CODE § R2-19-119
  • BLACK’S LAW DICTIONARY 1373 (10th ed. 2014)
  • Johnson v. The Pointe Community Association, 205 Ariz. 485, 73 P.3d 616 (App. 2003)
  • Powell v. Washburn, 211 Ariz. 553, 556 ¶ 9, 125 P.3d 373, 376 (2006)
  • Grubb & Ellis Management Services, Inc. v. 407417 B.C., L.L.C., 213 Ariz. 83, 138 P.3d 1210 (App. 2006)
  • ARIZ. REV. STAT. § 32-2199.02
  • ARIZ. REV. STAT. section 32-2199.04
  • ARIZ. REV. STAT. section 41-1092.09

Analytics Highlights

Topics: HOA, CC&Rs, Business Use, Home Business, Parking, Traffic, Civil Penalty
Additional Citations:

  • ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
  • ARIZ. ADMIN. CODE § R2-19-119
  • BLACK’S LAW DICTIONARY 1373 (10th ed. 2014)
  • Johnson v. The Pointe Community Association, 205 Ariz. 485, 73 P.3d 616 (App. 2003)
  • Powell v. Washburn, 211 Ariz. 553, 556 ¶ 9, 125 P.3d 373, 376 (2006)
  • Grubb & Ellis Management Services, Inc. v. 407417 B.C., L.L.C., 213 Ariz. 83, 138 P.3d 1210 (App. 2006)
  • ARIZ. REV. STAT. § 32-2199.02
  • ARIZ. REV. STAT. section 32-2199.04
  • ARIZ. REV. STAT. section 41-1092.09

Decision Documents

19F-H1919044-REL-RHG Decision – 733509.pdf

Uploaded 2026-01-09T17:24:55 (38.6 KB)

Pointe Tapatio Community Association vs. Lanye C. and Devin E. Wilkey

Posted on by

Case Summary

Case ID 19F-H1919044-REL
Agency ADRE
Tribunal OAH
Decision Date 2019-05-07
Administrative Law Judge Thomas Shedden
Outcome partial
Filing Fees Refunded $0.00
Civil Penalties $500.00

Parties & Counsel

Petitioner Pointe Tapatio Community Association Counsel Lauren Vie
Respondent Lanye C. Wilkey and Devin E. Wilkey Counsel Joseph Velez

Alleged Violations

CC&R Article 3, section 3.1

Outcome Summary

The ALJ found that the Respondents violated the CC&Rs by operating a business that created traffic and parking. The Respondents were ordered to cease business operations and pay a $500.00 civil penalty. The Petitioner's request for a refund of its filing fee was denied.

Why this result: Petitioner's request for refund of the filing fee was denied because they cited no authority showing that the refund was within the tribunal’s authority.

Key Issues & Findings

Violation of Residential Use covenant prohibiting traffic/parking generation by business

The Petitioner HOA alleged that the Respondents, co-owners of the unit, violated CC&Rs Article 3, section 3.1 by operating a payroll processing company out of the unit. The ALJ found that the business required two employees to drive to the unit daily, thereby creating traffic and parking, which clearly and unambiguously violates the CC&R provision prohibiting non-residential use that creates traffic or parking.

Orders: Respondents were ordered to cease business operations at the unit (720 E. North Lane, Unit 1) within thirty-five days to comply with CC&R Article 3, section 3.1, and pay a civil penalty of $500.00 to the Department of Real Estate within sixty days. The Petitioner's request for refund of the filing fee was denied.

Filing fee: $0.00, Fee refunded: No, Civil penalty: $500.00

Disposition: petitioner_win

Cited:

  • ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
  • ARIZ. ADMIN. CODE § R2-19-119
  • BLACK’S LAW DICTIONARY 1373 (10th ed. 2014)
  • Johnson v. The Pointe Community Association, 205 Ariz. 485, 73 P.3d 616 (App. 2003)
  • Powell v. Washburn, 211 Ariz. 553, 556 ¶ 9, 125 P.3d 373, 376 (2006)
  • Grubb & Ellis Management Services, Inc. v. 407417 B.C., L.L.C., 213 Ariz. 83, 138 P.3d 1210 (App. 2006)
  • ARIZ. REV. STAT. § 32-2199.02
  • ARIZ. REV. STAT. section 32-2199.04
  • ARIZ. REV. STAT. section 41-1092.09

Analytics Highlights

Topics: HOA, CC&Rs, Business Use, Home Business, Parking, Traffic, Civil Penalty
Additional Citations:

  • ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11
  • ARIZ. ADMIN. CODE § R2-19-119
  • BLACK’S LAW DICTIONARY 1373 (10th ed. 2014)
  • Johnson v. The Pointe Community Association, 205 Ariz. 485, 73 P.3d 616 (App. 2003)
  • Powell v. Washburn, 211 Ariz. 553, 556 ¶ 9, 125 P.3d 373, 376 (2006)
  • Grubb & Ellis Management Services, Inc. v. 407417 B.C., L.L.C., 213 Ariz. 83, 138 P.3d 1210 (App. 2006)
  • ARIZ. REV. STAT. § 32-2199.02
  • ARIZ. REV. STAT. section 32-2199.04
  • ARIZ. REV. STAT. section 41-1092.09

Video Overview

Audio Overview

Decision Documents

19F-H1919044-REL Decision – 706518.pdf

Uploaded 2026-01-23T17:28:45 (36.5 KB)

19F-H1919044-REL Decision – 706560.pdf

Uploaded 2026-01-23T17:28:49 (108.8 KB)





Briefing Doc – 19F-H1919044-REL


Administrative Hearing Briefing: Pointe Tapatio Community Association vs. Wilkey

Executive Summary

This document details the findings and decision of an administrative law judge in the case of Pointe Tapatio Community Association versus residents Layne C. and Devin E. Wilkey. The core issue was the operation of a payroll processing company, Devau Human Resources, from the Wilkeys’ residential unit. The Association alleged this violated community CC&Rs, which prohibit non-residential uses that create traffic or parking. The Wilkeys admitted that two employees commuted to the unit daily but argued they had received permission from a former property manager.

The judge found in favor of the Association, concluding that the daily commute of two employees constituted the creation of “traffic and parking,” a direct and unambiguous violation of the CC&Rs. The judge deemed the residents’ claims of verbal permission to be unsubstantiated and irrelevant, as the covenant’s language was clear. Consequently, the judge ordered the Wilkeys to cease all business operations at the unit within 35 days and imposed a civil penalty of $500.

——————————————————————————–

Case Overview

Case Name

Pointe Tapatio Community Association, Petitioner, vs. Lanye C. Wilkey and Devin E. Wilkey, Respondent.

Case Number

19F-H1919044-REL

Jurisdiction

Office of Administrative Hearings (Arizona Department of Real Estate)

Hearing Date

April 26, 2019

Decision Date

May 7, 2019

Administrative Law Judge

Thomas Shedden

Petitioner’s Counsel

Lauren Vie, Esq.

Respondent’s Counsel

Joseph Velez, Esq.

——————————————————————————–

Central Allegation and Governing Covenant

The Pointe Tapatio Community Association (Petitioner) alleged that Layne C. Wilkey and Devin E. Wilkey (Respondents) violated the community’s Covenants, Conditions, and Restrictions (CC&Rs) by using their residential unit as an office for their business.

The specific provision at issue is Article 3, Section 3.1 of the CC&Rs, which states:

“Residential. Each Residence shall be used, improved, and devoted exclusively to first class residential use, and no gainful occupation, profession, trade, business, religion, or other non-residential use which creates traffic [or] parking … shall be conducted from any Residence [or part thereof.]”

——————————————————————————–

Key Findings of Fact

The Business Operation

• Respondents: Layne C. Wilkey (mother) and Devin E. Wilkey (son) are co-owners of the unit at 720 E. North Lane, Unit 1 (Lot 50).

• Company: They own and operate Devau Human Resources, a payroll processing company, from this unit. The business also operates from a second, commercial site in Tempe.

• History: The business was moved into the residential unit from a commercial location in late 2009.

• Public Presence: Devau’s website and Google Maps both list the 720 E. North Lane address as an office location, with stated office hours from 9:00 a.m. to 5:00 p.m., Monday through Friday. The website notes it is a “mailing address only.”

• Admission: Ms. Wilkey acknowledged during testimony that they consider the unit to be an office.

Employee Activity and Impact

• The Wilkeys acknowledged that two Devau employees commute to the unit to work.

• One employee works from 9:30 a.m. to 4:00 p.m., Monday through Thursday.

• A second employee works from 9:30 a.m. to 5:00 p.m., Monday through Friday.

• These employees at times park their vehicles on the community’s streets.

• The business does not have clients or customers who visit the unit.

The Dispute Over Permission

• Respondents’ Claim: The Wilkeys asserted they had permission to operate the business from Howard Flisser, a former property manager. They admitted they had no written confirmation and had never spoken to Mr. Flisser directly about it.

◦ Ms. Wilkey testified that in 2009, she asked her husband, who asked a salesperson, who then allegedly asked Mr. Flisser and relayed that it was permissible.

◦ Mr. Wilkey testified that his now-deceased father would not have taken the risk of moving the business without permission.

• Petitioner’s Rebuttal: Board member Paula Duistermars testified that Mr. Flisser stated a few days before the hearing that he could not recall giving permission and, on two occasions during the conversation, volunteered that he had never given permission.

• Authority: Ms. Duistermars also testified that Mr. Flisser lacked the authority to grant such permission; only the Board of Directors could do so.

Association’s Stance and Actions

• Notification: Through a letter dated August 8, 2018, the Association informed the Wilkeys of the violation and required compliance by August 31, 2018.

• Petition: The Association filed the petition that initiated the hearing on or about January 17, 2019.

• Other Businesses: The Association permits certain home-based businesses that do not generate traffic or parking, such as telecommuting and online teaching, without requiring Board permission.

• Complaints: Ms. Duistermars acknowledged she was unaware of any specific complaints regarding traffic, parking, or noise from the Wilkeys’ unit. However, she testified that the Board was first made aware of the business operation when another resident brought the issue to its attention.

——————————————————————————–

Legal Analysis and Conclusions

• Standard of Proof: The judge determined all issues based on a “preponderance of the evidence,” defined as evidence with the most convincing force.

• CC&Rs as Contract: The CC&Rs are a legally binding contract between the Association and the residents.

• Unambiguous Language: The judge found the language in CC&R Article 3, Section 3.1 to be clear and unambiguous. Such covenants must be enforced to give effect to the parties’ original intent.

• Direct Violation: The judge concluded that the evidence overwhelmingly showed the Wilkeys were operating a business from their unit. The admission that two employees drive to the unit and park on the street proves that the business creates both traffic and parking.

• Violation Trigger: The creation of any traffic or parking by the business is sufficient to constitute a violation. The CC&R does not require that the traffic or parking cause a secondary violation or generate resident complaints. Therefore, the lack of other complaints was deemed to have little probative value.

• Final Conclusion: Based on the facts, the Wilkeys are in clear violation of CC&R Article 3, Section 3.1.

——————————————————————————–

Final Order and Penalties

Based on the findings of fact and conclusions of law, the Administrative Law Judge issued the following orders:

1. Compliance Order: Respondent Layne C. Wilkey and Devin E. Wilkey must cease all business operations at 720 E. North Lane, Unit 1 (Lot 50) within thirty-five (35) days of the Order’s effective date.

2. Civil Penalty: The Respondents must pay a civil penalty of $500.00 to the Department of Real Estate within sixty (60) days of the Order’s effective date. Payment must be made by cashier’s check or money order.

3. Filing Fee: The Petitioner’s request for a refund of its filing fee was denied, as the judge found no legal authority to grant it.

The Order is binding unless a request for rehearing is filed with the Commissioner of the Department of Real Estate within 30 days of service.






Study Guide – 19F-H1919044-REL


Study Guide:Pointe Tapatio Community Association v. Wilkey

This guide provides a comprehensive overview of the administrative law case Pointe Tapatio Community Association v. Wilkey, Case No. 19F-H1919044-REL, heard before the Arizona Office of Administrative Hearings. It details the central conflict, the arguments presented by both parties, the legal standards applied, and the final judgment.

Case Summary

The Pointe Tapatio Community Association (Petitioner) filed a complaint against homeowners Layne C. Wilkey and Devin E. Wilkey (Respondent), alleging that they were violating the community’s Covenants, Conditions, and Restrictions (CC&Rs) by operating a business, Devau Human Resources, from their residential unit. The Association argued that the business, which employed two individuals who commuted to the property, generated traffic and parking, explicitly prohibited by the CC&Rs for non-residential activities. The Wilkeys contended they had received verbal permission years prior and that the business was not disruptive. The Administrative Law Judge found in favor of the Association, ruling that the Wilkeys were in clear violation of the community’s governing documents.

Key Parties & Entities

Name / Entity

Key Actions & Involvement

Pointe Tapatio Community Association

Petitioner

The homeowners’ association that filed the petition alleging a CC&R violation. Represented by Lauren Vie, Esq.

Layne C. Wilkey & Devin E. Wilkey

Respondent

Mother and son, co-owners of the unit at 720 E. North Lane, Unit 1. Operators of Devau Human Resources. Represented by Joseph Velez, Esq.

Thomas Shedden

Administrative Law Judge (ALJ)

Presided over the hearing, made findings of fact, drew conclusions of law, and issued the final order.

Arizona Department of Real Estate

Regulatory Body

Issued the initial Notice of Hearing and has legal authority over such disputes under ARIZ. REV. STAT. Title 32, Ch. 20, Art. 11.

Paula Duistermars

Board Member, Pointe Tapatio

Testified on behalf of the Association, detailing the Board’s position and interactions regarding the violation.

Howard Flisser

Property Manager (Former or Current)

Named by the Wilkeys as the source of verbal permission to operate their business; Flisser denied recalling this.

Devau Human Resources

Business Entity

A payroll processing company owned by the Wilkeys, operating out of the residential unit and a commercial site in Tempe.

Office of Administrative Hearings

Adjudicative Body

The venue for the hearing, located at 1740 West Adams Street, Lower Level, in Phoenix, Arizona.

Case Timeline

• Late 2009: The Wilkeys move their business, Devau Human Resources, from a commercial location into their unit at Pointe Tapatio.

• August 8, 2018: Pointe Tapatio sends a letter informing the Wilkeys they are out of compliance with the CC&Rs and must comply by August 31, 2018.

• January 17, 2019 (approx.): Pointe Tapatio files a petition with the Arizona Department of Real Estate.

• February 28, 2019: The Arizona Department of Real Estate issues a Notice of Hearing.

• April 26, 2019: The administrative hearing is held before ALJ Thomas Shedden.

• May 7, 2019: ALJ Thomas Shedden issues the final decision and order.

Central Conflict: CC&R Article 3, Section 3.1

The core of the dispute revolved around the interpretation and enforcement of a specific restrictive covenant within the community’s governing documents.

• The Allegation: Pointe Tapatio alleged that the Wilkeys were using their unit as an office for a “gainful occupation,” which is not a “first class residential use.”

• The Specific Provision: Article 3, Section 3.1 of the CC&Rs states:

• The Triggering Condition: The prohibition is not absolute. It applies specifically to non-residential uses that create traffic or parking.

Arguments and Evidence

Arguments & Evidence Presented

Petitioner (Pointe Tapatio)

  • Employee Activity: The Wilkeys acknowledged two employees drive to the unit to work Monday through Friday, creating traffic and parking on community streets.
  • Public Information: Devau’s website and Google Maps listed the residential unit as an office address with set business hours (9:00 a.m. to 5:00 p.m.).
  • Owner Admission: Ms. Wilkey acknowledged during testimony that they consider the unit to be an office.
  • Lack of Authority: Board member Paula Duistermars testified that property manager Howard Flisser did not have the authority to grant permission for a business; only the Board could. She also testified that Flisser could not recall giving permission and had volunteered that he never did.

Respondent (The Wilkeys)

  • Verbal Permission: The Wilkeys claimed they received verbal permission from property manager Howard Flisser in 2009. They admitted they never spoke to him directly and had nothing in writing.
  • Implied Permission: Mr. Wilkey argued his father would not have taken the risk of moving the payroll business without permission, implying it must have been granted.
  • No Direct Complaints: It was acknowledged that the Association was not aware of specific complaints filed against the Wilkeys for traffic, parking, or noise issues.
  • Residential Use: Mr. Wilkey testified that he considers the unit one of his two primary residences, though he did not provide a responsive answer when asked how often he stayed there.

The Judge’s Decision & Legal Reasoning

ALJ Thomas Shedden concluded that the Wilkeys were in violation of the CC&Rs based on a “preponderance of the evidence.”

• The Wilkeys operate Devau Human Resources, a payroll processing company, from the unit.

• Two employees commute to the unit for work and sometimes park on community streets.

• The business is publicly listed at the residential address.

• The Wilkeys’ claim of verbal permission from Howard Flisser was not substantiated. Testimony from Paula Duistermars indicated Flisser could not recall, and in fact denied, giving such permission.

• The Association does permit some home businesses (e.g., telecommuting, online teaching) that do not create traffic or parking and do not require Board permission.

1. CC&Rs as a Contract: The CC&Rs constitute a binding contract between the homeowners and the Association.

2. Unambiguous Language: The language in Article 3, section 3.1 is clear and unambiguous. It prohibits businesses that create traffic or parking.

3. Violation Proven: The evidence clearly showed the Wilkeys’ business created both traffic and parking due to its two commuting employees. This is a direct violation of the unambiguous terms of the CC&R.

4. No Other Violation Needed: The fact that no other rules (e.g., specific parking ordinances) were broken is irrelevant. The creation of any traffic or parking by the business is sufficient to trigger the violation as written.

1. Cease Operations: The Wilkeys were ordered to comply with CC&R Article 3, section 3.1 by ceasing business operations at the unit within 35 days.

2. Civil Penalty: The Wilkeys were ordered to pay a civil penalty of $500.00 to the Department of Real Estate within 60 days.

3. Filing Fee Request Denied: The Association’s request to have its filing fee refunded was denied because it cited no legal authority showing the judge had the power to grant it.

——————————————————————————–

Answer the following questions in 2-3 complete sentences based on the information in the case file.

1. Who were the petitioner and the respondents in this case, and what was their relationship?

2. What specific activity led the petitioner to claim the respondents were violating the CC&Rs?

3. According to Article 3, section 3.1, what condition makes a non-residential use of a property a violation?

4. What was the respondents’ primary defense for operating their business from the unit?

5. Why did the Administrative Law Judge find the respondents’ primary defense unconvincing?

6. What two specific pieces of evidence demonstrated that the business created traffic and parking?

7. What is the legal standard of proof required in this type of administrative hearing, and what does it mean?

8. What two penalties were imposed on the Wilkeys in the final order?

9. Does the Pointe Tapatio Community Association prohibit all home-based businesses? Explain.

10. Who was Howard Flisser, and what was his significance to the respondents’ case?

——————————————————————————–

Answer Key

1. The petitioner was the Pointe Tapatio Community Association. The respondents were Layne C. Wilkey and Devin E. Wilkey, who were homeowners within the community and co-owners of the unit in question.

2. The Wilkeys were operating their payroll processing company, Devau Human Resources, out of their residential unit. This included having two employees commute to the property to work during business hours.

3. A non-residential use becomes a violation if it “creates traffic [or] parking.” The rule does not require a certain amount of traffic or parking, only that it is created by the business activity.

4. The respondents’ primary defense was that they had received verbal permission to operate the business from the community’s property manager, Howard Flisser, back in 2009.

5. The judge found the defense unconvincing because the Wilkeys had no written proof, had not spoken to Mr. Flisser directly, and testimony from a board member indicated Mr. Flisser could not recall—and later denied—ever giving such permission. Furthermore, the property manager likely lacked the authority to grant it.

6. The evidence was the Wilkeys’ own acknowledgement that two of their employees drive to the unit to work on a weekly basis. This commuting by non-resident employees necessarily creates traffic and, at times, requires them to park on community streets.

7. The standard of proof is a “preponderance of the evidence.” This means the greater weight of the evidence must be sufficient to incline a fair and impartial mind to one side of the issue over the other, even if it does not remove all reasonable doubt.

8. The Wilkeys were ordered to cease all business operations at the unit within 35 days. They were also ordered to pay a civil penalty of $500.00 to the Department of Real Estate within 60 days.

9. No, the association does not prohibit all home-based businesses. It allows for activities like telecommuting and teaching online classes, which do not require board permission because they do not create traffic or parking.

10. Howard Flisser was the property manager whom the Wilkeys claimed gave them verbal permission to run their business. His significance was central to their defense, but his alleged permission was unsubstantiated and contradicted by later testimony.

——————————————————————————–

Essay Questions

The following questions are designed for longer-form analysis. No answers are provided.

1. Analyze the concept of “preponderance of the evidence” as applied in this case. How did the evidence presented by Pointe Tapatio meet this standard, while the Wilkeys’ evidence did not?

2. Discuss the legal principle that CC&Rs are treated as contracts. Explain how Judge Shedden applied contract law principles, particularly regarding “unambiguous” language, to reach his conclusion.

3. Evaluate the Wilkeys’ defense strategy, focusing on their claim of verbal permission from Howard Flisser. Why was this argument legally insufficient? What kind of evidence would have been necessary to make it successful?

4. Examine the distinction the Pointe Tapatio Community Association makes between permissible home-based businesses (like telecommuting) and impermissible ones (like Devau Human Resources). What is the key factor in this distinction according to the CC&Rs, and how does it relate to the core purpose of residential covenants?

5. Based on the judge’s order, discuss the remedies available to a homeowner’s association in Arizona when a CC&R violation is proven. What penalties were imposed, and what penalty was requested but denied?

——————————————————————————–

Glossary of Key Terms

• Administrative Law Judge (ALJ): A judge and trier of fact who presides over administrative hearings, such as disputes handled by the Office of Administrative Hearings. The ALJ renders decisions, called orders, based on evidence and legal arguments.

• CC&Rs (Covenants, Conditions, and Restrictions): The governing legal documents that set out the rules for a planned community or subdivision. In this case, they are treated as a legally binding contract between the association and the homeowners.

• Civil Penalty: A monetary fine levied by a government agency or administrative court for a violation of a statute or rule. In this case, a $500 penalty was imposed on the Wilkeys for violating the community documents.

• Conclusions of Law: The section of a judicial decision where the judge applies legal principles and statutes to the established facts of the case to reach a judgment.

• Findings of Fact: The section of a judicial decision that formally lists the factual determinations made by the judge based on the evidence presented at the hearing.

• Order: The final ruling or judgment issued by an Administrative Law Judge that directs the parties on what actions they must take.

• Petitioner: The party who initiates a legal action or files a petition seeking a legal remedy. In this case, the Pointe Tapatio Community Association.

• Preponderance of the Evidence: The standard of proof in most civil and administrative cases. It requires the trier of fact to believe that it is more likely than not that a claim is true, based on the evidence presented.

• Respondent: The party against whom a petition is filed or an appeal is brought. In this case, Layne C. Wilkey and Devin E. Wilkey.






Blog Post – 19F-H1919044-REL


4 Surprising Lessons from an HOA Lawsuit That Shut Down a 10-Year-Old Home Business

Introduction: The Rise of the Home Office and the Rules You Didn’t Know Existed

In an age where the line between the living room and the corner office has all but vanished, millions of us have embraced working from home. But as we settle into our home-based routines, a critical question often goes unasked: Are you truly familiar with your homeowner’s association (HOA) rules regarding home-based businesses?

For the Wilkey family, owners of Devau Human Resources, the answer to that question proved to be a costly one. After operating their payroll processing company from their home for nearly a decade without a single complaint, they found themselves in a legal battle that ultimately shut them down. Their case serves as a powerful cautionary tale about what can happen when long-standing home businesses collide with the fine print of HOA rules.

1. It’s Not About Complaints, It’s About the Contract

One of the most chilling lessons from the Wilkey case is that the HOA’s action wasn’t triggered by angry neighbors complaining about noise or traffic. In fact, Board member Paula Duistermars testified that she was unaware of any such complaints. The issue arose simply because “a resident brought the issue to [the Board’s] attention.”

This reveals a crucial legal reality: your business’s existence, not its impact, can be the sole trigger for enforcement. It doesn’t take a chorus of angry neighbors—just one person notifying the Board of a potential rule violation is enough. The Covenants, Conditions, and Restrictions (CC&Rs) are a legally binding contract, and the court’s decision was not based on whether the business was a nuisance, but simply whether it complied with the contract’s terms. Your takeaway: You must operate as if the rulebook will be enforced literally, because it can be.

2. The Deciding Factor: A Single Clause About “Traffic and Parking”

The entire legal dispute hinged on the precise wording of one specific rule. The HOA wasn’t enforcing a vague, blanket ban on all home businesses; its power came from a single, carefully worded clause in the CC&Rs.

The relevant section, Article 3, section 3.1, stated:

“Each Residence shall be used, improved, and devoted exclusively to first class residential use, and no gainful occupation, profession, trade, business, religion, or other non-residential use which creates traffic [or] parking … shall be conducted from any Residence [or part thereof.]”

As a legal analyst, I can tell you why this clause was so powerful: its focus on a tangible impact (“creates traffic [or] parking”) made it highly defensible. A blanket prohibition on “all businesses” might be open to challenge, but this specific, impact-based rule was nearly impossible to argue against once the facts were established. The Wilkeys’ business was found in violation specifically because it created traffic and parking, which is also why the HOA permitted other home businesses, like telecommuting, that did not.

3. Your Two-Person TeamIsa Traffic Problem

Many homeowners assume that business traffic rules are meant to prevent a steady stream of clients visiting a residential property. The Wilkeys had no clients come to their unit. However, this did not protect them.

The undisputed fact that proved decisive was that two of the company’s employees commuted to the home to work—one from Monday to Thursday and the other from Monday to Friday. The judge concluded that this daily employee commute constituted the creation of “traffic and parking” as prohibited by the CC&Rs. The employees at times parking on the community’s common streets provided concrete, undeniable evidence of this. This case sets a precedent that a micro-business with just one or two employees commuting to the home can be deemed in violation—a scenario many entrepreneurs wouldn’t even consider a “traffic” issue.

4. “He Said We Could” Is Not a Legal Defense

The Wilkeys asserted that they had received verbal permission to operate their business from the property manager back in 2009. This defense completely fell apart under legal scrutiny.

Courts prioritize written agreements and official board actions over “he said/she said” accounts, especially when they involve multi-level hearsay (in this case, a husband asking a salesperson who asked the manager). The defense failed for several clear reasons: the Wilkeys had no written proof, the manager denied recalling or ever giving such permission, and most importantly, a Board member testified that the manager lacked the authority to grant this permission anyway. Only the Board could.

The takeaway is unambiguous: Never rely on verbal assurances. Get all permissions from your HOA Board in writing, or they do not legally exist.

Conclusion: Know Your Rules Before You Unpack Your Desk

The story of the Wilkey family is a stark reminder that HOA documents are not mere suggestions; they are legally binding contracts where every word matters. The Wilkeys’ experience is a costly lesson for every home-based professional. Proactive compliance is your only true protection. The final outcome was an order for them to cease all business operations from their home within 35 days and pay a $500 civil penalty.

You might have been working from home for years without a problem, but have you ever read the fine print on what your community actually allows?


Case Participants

Petitioner Side

  • Lauren Vie (HOA attorney)
    Attorney for Petitioner
  • Paula Duistermars (board member)
    Pointe Tapatio Community Association
    Presented testimony for Petitioner
  • Beth Mulchay (HOA attorney)
    Mulchay Law Firm, P.C.
    Listed on transmission list

Respondent Side

  • Layne C. Wilkey (respondent)
  • Devin E. Wilkey (respondent)
  • Joseph A Velez (respondent attorney)
    For Respondent

Neutral Parties

  • Thomas Shedden (ALJ)
  • Judy Lowe (Commissioner)
    Arizona Department of Real Estate

Other Participants

  • Howard Flisser (property manager)
    Statements regarding alleged business permission were discussed
  • Felicia Del Sol (unknown)

George E Lord vs. The Boulders at La Reserve Condominium Association

Posted on by

Case Summary

Case ID 19F-H1918013-REL
Agency ADRE
Tribunal OAH
Decision Date 2018-12-17
Administrative Law Judge Tammy L. Eigenheer
Outcome no
Filing Fees Refunded $0.00
Civil Penalties $0.00

Parties & Counsel

Petitioner George E Lord Counsel —
Respondent The Boulders at La Reserve Condominium Association Counsel Maria Kupillas

Alleged Violations

A.R.S. § 33-1242, A.R.S. § 33-1260.01, and CC&Rs

Outcome Summary

The Administrative Law Judge dismissed the Petition in its entirety, concluding that the Petitioner failed to establish by a preponderance of the evidence that the Respondent Condominium Association violated A.R.S. § 33-1242, A.R.S. § 33-1260.01, or the association's CC&Rs.

Why this result: Petitioner failed to establish a violation of any statute or covenant alleged. The core findings supported the HOA's position that the lessee was engaging in prohibited business activity and subletting, and that the charged attorney fees were permissible.

Key Issues & Findings

Alleged violations concerning notice procedures, leasing restrictions, prohibited business use, and excessive fees.

Petitioner alleged Respondent violated A.R.S. § 33-1242 by failing to include proper citations in violation notices, violated A.R.S. § 33-1260.01 and CC&Rs by imposing illegal restrictions on occupancy dates and prohibiting tenant guests, and violated fee limits under A.R.S. § 33-1260.01(E) by charging $250 in attorney fees.

Orders: The Petition was dismissed.

Filing fee: $0.00, Fee refunded: No

Disposition: petitioner_loss

Cited:

  • A.R.S. § 33-1242
  • A.R.S. § 33-1260.01
  • A.R.S. § 33-1258
  • A.A.C. R2-19-119
  • CC&Rs Section 7.21
  • CC&Rs Section 7.3

Analytics Highlights

Topics: condominium, HOA dispute, leasing restrictions, short-term rental, business use, notice procedure, attorney fees
Additional Citations:

  • A.R.S. § 33-1242
  • A.R.S. § 33-1260.01
  • A.R.S. § 33-1258
  • A.A.C. R2-19-119
  • CC&Rs Section 7.21
  • CC&Rs Section 7.3

Video Overview

Audio Overview

Decision Documents

19F-H1918013-REL Decision – 677039.pdf

Uploaded 2025-10-09T03:33:32 (115.9 KB)

19F-H1918013-REL Decision – 677040.pdf

Uploaded 2025-10-09T03:33:32 (47.9 KB)





Briefing Doc – 19F-H1918013-REL


Briefing Document: Lord v. The Boulders at La Reserve Condominium Association

Executive Summary

This document synthesizes the findings and conclusions from the Administrative Law Judge Decision in case number 19F-H1918013-REL, involving Petitioner George E. Lord and Respondent The Boulders at La Reserve Condominium Association. The judge ultimately dismissed all claims brought by the Petitioner, ruling that the Association acted within the bounds of Arizona statutes and its governing documents.

The core of the dispute centered on Mr. Lord’s leasing of three condominium units to an individual, Barrie Shepley, who used the properties to house participants for his commercial fitness training camps. The Association contended this arrangement constituted a prohibited short-term sublease and an improper business use of the units, leading them to suspend amenity access for the occupants.

The judge’s decision affirmed the Association’s position on all counts. Key takeaways include:

• Substance Over Form: The judge concluded that despite the absence of a formal sublease agreement, the nature of the arrangement—specifically a camp pricing structure that varied based on the number of occupants per condo—was effectively a sublet designed to house an “itinerant population,” contrary to the “spirit and purpose” of the community’s rules.

• Business Use Violation: The operation was found to be a business activity that violated the CC&Rs by requiring persons (camp participants) to come to the residential units.

• Procedural Compliance: The Association’s violation notices were deemed compliant with Arizona law. The judge noted that the statute only requires a detailed citation of the violated rule after the owner responds to the initial notice, which the Petitioner failed to do.

• Legality of Fees: A $250 charge levied by the Association’s counsel was determined to be a permissible charge for attorney’s fees related to potential collection, not an illegal penalty for leasing information as the Petitioner alleged.

As a result of these findings, the Petitioner’s request for relief was denied, and the petition was dismissed in its entirety.

I. Case Overview

• Parties:

◦ Petitioner: George E. Lord (unit owner)

◦ Respondent: The Boulders at La Reserve Condominium Association

• Case Number: 19F-H1918013-REL

• Venue: Arizona Office of Administrative Hearings

• Presiding Judge: Tammy L. Eigenheer, Administrative Law Judge

• Hearing Date: November 26, 2018

• Decision Date: December 17, 2018

• Final Disposition: The petition filed by George E. Lord was dismissed.

II. Factual Background and Timeline of Events

1. Lease Agreements: On or about December 4, 2017, Petitioner George Lord, through his management company, leased two units at The Boulders to Barrie Shepley for a term from March 7, 2018, to April 30, 2018. A third unit was subsequently leased to Mr. Shepley on or about January 15, 2018.

2. Commercial Use: Mr. Shepley operated a Canadian fitness business, “Personal Best,” which offered training camps in Tucson. Accommodations at The Boulders were included in the camp packages. The price for a camp varied based on occupancy:

◦ $950.00 each for four campers in a condo

◦ $1075.00 each for three campers in a condo

◦ $1299.00 each for two campers in a condo

3. Occupancy Begins: On March 7, 2018, guests of Mr. Shepley (camp participants) began arriving to occupy the three leased units.

4. Association Intervention: On March 9, 2018, Community Manager Danielle Morris emailed Mr. Lord, stating the Association’s belief that he was in violation of the CC&Rs by allowing subleasing for periods less than the 30-day minimum. Ms. Morris informed him that amenity access cards for the three units were deactivated.

5. Dispute Escalation: Mr. Lord contended that the occupants were merely “guests” of Mr. Shepley, not subletters. Ms. Morris countered that the Association required the names of all occupants and the duration of their stays, and that each occupant must stay for a minimum of 30 days.

6. Information Provided: On March 13, 2018, Mr. Lord provided the names of the occupants and their dates of occupancy, requesting that amenities be restored.

7. Violation Reiterated: On March 16, 2018, Ms. Morris stated the violation was ongoing, as occupants staying from March 7 to March 31 did not meet the 30-day minimum stay requirement.

8. Formal Notice of Violation: On March 18, 2018, Mr. Lord received formal Notices of Violations for the three units. The notices stated that amenity access was suspended because the HOA was not provided with the names of adult occupants and their timeframes. The notice warned that a $300 fine could be applied. Mr. Lord did not respond to these notices.

9. Attorney Involvement: On March 22, 2018, Mr. Lord received a letter from the Association’s legal counsel outlining its legal position and noting an amount due of $250 for attorney’s fees already incurred.

10. Lease Cancellation & Financial Loss: On April 2, 2018, Mr. Shepley cancelled the remainder of the leases due to the lack of amenities for his guests. Mr. Lord asserted a resulting financial loss of $6,900 in rental fees for April 2018.

11. Petition Filing: On August 31, 2018, Mr. Lord filed a petition with the Arizona Department of Real Estate, alleging the Association violated state statutes and its own CC&Rs.

III. Petitioner’s Allegations and Arguments

Mr. Lord’s petition was based on three primary allegations against the Association:

• Allegation 1: Defective Violation Notice (A.R.S. § 33-1242): The Petitioner argued that the Notices of Violations were legally deficient because they failed to cite the specific statute or CC&R provision that had allegedly been violated.

• Allegation 2: Unlawful Occupancy Requirements (A.R.S. § 33-1260.01 & CC&Rs): The Petitioner asserted that the Association overstepped its authority by demanding that each occupant, whom he characterized as a “guest” of the primary lessee, must stay for a minimum of 30 days. He argued the 30-day minimum lease term applied only to the primary lease with Mr. Shepley, not to the occupants.

• Allegation 3: Improper Fees (A.R.S. § 33-1260.01(E)): The Petitioner claimed that the $250 charge from the Association’s attorney constituted an illegal fee, penalty, or charge related to providing leasing information, which he argued was prohibited by statute.

IV. Administrative Law Judge’s Findings and Conclusions

The Administrative Law Judge found that the Petitioner failed to meet the burden of proof for any of his allegations and dismissed the petition. The judge’s reasoning is detailed below.

Finding 1: No Violation of A.R.S. § 33-1242 (Violation Notice)

The judge determined that the Association’s initial Notices of Violations were legally sufficient.

• Legal Reasoning: A.R.S. § 33-1242(C) requires an association to cite the specific provision of the condominium documents that has been violated. However, this obligation is only triggered after the unit owner sends a written response to the initial notice by certified mail.

• Factual Basis: The Petitioner admitted that he did not respond to the formal Notices of Violations he received.

• Conclusion: Because the Petitioner did not take the legally required step to trigger the Association’s duty to provide a specific citation, the Association did not violate the statute.

Finding 2: No Violation of A.R.S. § 33-1260.01 or CC&Rs (Leasing Rules)

The judge concluded that the Association was justified in its actions regarding the occupancy of the units.

• The Arrangement was a “Form” of Subletting: The judge ruled against the Petitioner’s argument that the occupants were merely “guests.” The fact that the price of the fitness camp changed based on how many people shared a unit was seen as evidence that Mr. Shepley was, in effect, subletting the units for his business.

• Prohibited Business Activity: The judge found that Mr. Shepley was operating a business from the units in a manner prohibited by Section 7.3 of the CC&Rs, which disallows business activity that “involve[s] persons coming to the Unit.”

• Spirit of the Law: The decision acknowledged that the specific facts of the case “falls between the cracks of the specific language of the statutes and the regulations.” However, the judge emphasized that the Association’s actions were consistent with the broader intent of its rules, stating, “given the totality of the circumstances, the spirit and purpose of the applicable rules is to allow an association to know who is in the community and to prevent an itinerant population.”

• Conclusion: The Petitioner failed to establish that the Association violated leasing statutes or its own CC&Rs.

Finding 3: No Violation of A.R.S. § 33-1260.01(E) (Fees)

The judge found that the $250 charge was not an illegal penalty.

• Nature of the Charge: The evidence showed that no fines for the lease policy violation had actually been assessed. The $250 charge was explicitly for attorney’s fees related to the potential collection of assessments.

• Legal Reasoning: The judge stated, “Nothing in the cited statute or the CC&Rs prohibits such a charge being implemented.” The fee was not a penalty for “incomplete or late information” as covered by the statute, but a charge for legal costs incurred by the Association.

• Conclusion: The Petitioner failed to establish a violation regarding the assessed fees.

V. Referenced Statutes and Governing Documents

Reference

Provision Summary

Relevance to Case

A.R.S. § 33-1242(B)&(C)

Outlines the process for a unit owner to respond to a violation notice and the association’s subsequent duty to provide specific details of the violation.

The judge found no violation because the Petitioner did not follow the procedure to trigger the association’s duty.

A.R.S. § 33-1260.01(C)

Limits the information an association can require about a tenant to names, contact info for adults, lease period, and vehicle information.

The Petitioner’s case rested on interpreting this statute; the judge found the Association’s inquiries justified by the unique circumstances.

A.R.S. § 33-1260.01(E)

Prohibits an association from imposing fees greater than $15 for incomplete or late leasing information.

The Petitioner argued the $250 attorney fee violated this, but the judge found it was a permissible charge for legal costs, not a penalty.

CC&R Section 7.21

Requires leases to be in writing, for a term of not less than 30 days, and requires owners to provide lessee names and lease dates.

The Association argued the arrangement violated the 30-day minimum stay rule for occupants, which the judge upheld in spirit.

CC&R Section 7.3

Prohibits business activities within a unit that involve persons coming to the unit.

The judge found Mr. Shepley’s fitness camp, which housed participants in the units, was a clear violation of this provision.

Leasing Policy

States a $300 fine may be imposed for violations of the 30-day minimum lease policy.

The Notice of Violation referenced this potential fine, though it was never actually assessed.

VI. Final Order and Procedural Notes

• Order: Based on the above findings, the Administrative Law Judge ordered that the Petition be dismissed.

• Binding Nature: The decision is binding on the parties unless a rehearing is granted. A request for rehearing must be filed with the Commissioner of the Department of Real Estate within 30 days of the service of the Order.

• Related Filings: On the same day the decision was issued, December 17, 2018, the court also issued a separate “Order Vacating Hearing,” likely a procedural filing to cancel a future hearing that was rendered unnecessary by the dismissal of the case.






Study Guide – 19F-H1918013-REL


Study Guide: Lord v. The Boulders at La Reserve Condominium Association

This study guide provides a detailed review of the administrative case No. 19F-H1918013-REL, heard by the Arizona Office of Administrative Hearings. The case involves a dispute between a condominium unit owner, George E. Lord, and his condominium association, The Boulders at La Reserve, concerning leasing policies, occupant regulations, and alleged statutory violations.

Short-Answer Quiz

Instructions: Answer the following questions in two to three complete sentences, based on the information provided in the source documents.

1. Who were the primary parties involved in this administrative hearing, and what were their respective roles?

2. Describe the business arrangement that Barrie Shepley, the petitioner’s lessee, was operating from the leased condominium units.

3. What was the first official action the Condominium Association’s management took in response to the arrival of Barrie Shepley’s guests, and what was their stated reason?

4. According to the Association, what two specific provisions of the governing documents were being violated by the petitioner and his lessee?

5. What was the petitioner’s central argument for why the occupants of the units were not in violation of the Association’s 30-day minimum stay requirement?

6. On what procedural grounds did the petitioner, George Lord, claim that the Association’s “Notice of Violations” was itself a violation of Arizona law (A.R.S. § 33-1242)?

7. Why did the Administrative Law Judge ultimately rule that the Association did not violate A.R.S. § 33-1242?

8. How did the judge interpret the fact that the price for Barrie Shepley’s fitness camps varied based on the number of people sharing a condo?

9. What financial loss did the petitioner claim to have suffered, and what was the direct cause of this loss?

10. What was the final ruling, or “Order,” issued by the Administrative Law Judge in this case?

——————————————————————————–

Answer Key

1. The primary parties were George E. Lord, the petitioner and owner of multiple condominium units, and The Boulders at La Reserve Condominium Association, the respondent and governing body for the community. The case was adjudicated by Administrative Law Judge Tammy L. Eigenheer.

2. Barrie Shepley operated a fitness business called “Personal Best” that offered training camps in the Tucson area. The price for these camps included accommodations at The Boulders, with the cost per person varying based on how many campers shared a condominium unit.

3. The Association’s first action was to deactivate the amenity access cards for the three units leased by Shepley. Danielle Morris, the Community Manager, stated this was due to a belief that the petitioner’s lessee was subleasing the units for periods of less than the 30-day minimum in violation of the CC&Rs.

4. The Association alleged violations of the CC&Rs related to subleasing for less than the 30-day minimum timeframe. The formal Notices of Violations also cited the failure to provide the names of all adult occupants and the timeframes of their stays to the HOA.

5. The petitioner argued that because his lessee, Mr. Shepley, was not charging a specific rental fee to the occupants, they were merely “guests” and not sub-lessees. Therefore, the 30-day minimum stay requirement applicable to leases did not apply to them.

6. The petitioner alleged that the Association’s failure to include a citation to the specific statute or CC&R provision that had allegedly been violated in the initial Notice of Violations was a violation of A.R.S. § 33-1242.

7. The judge ruled against the petitioner because A.R.S. § 33-1242 only requires an association to provide the specific provision violated after the unit owner sends a written response to the initial notice by certified mail. The petitioner admitted that he did not respond to the Notices of Violations.

8. The judge found that the tiered pricing structure supported the conclusion that Mr. Shepley was, “in a form, subletting the units.” The fact that the camp price decreased as more people shared a unit indicated that the occupants were paying for their accommodations, not simply staying as guests.

9. The petitioner asserted a financial loss of $6,900 in rental fees for April 2018. This loss was directly caused by Barrie Shepley canceling the remainder of his leases due to the lack of amenities for his occupants.

10. The Administrative Law Judge’s final order was that the Petition filed by George E. Lord be dismissed. This decision was binding unless a rehearing was granted.

——————————————————————————–

Essay Questions

Instructions: The following questions are designed to test a deeper, more analytical understanding of the case. Formulate a comprehensive response to each prompt, citing specific facts, arguments, and legal interpretations from the case file.

1. Analyze the Administrative Law Judge’s reasoning for concluding that Barrie Shepley was “in a form, subletting” the units. Discuss the evidence cited and the concept of the “spirit and purpose” of the rules versus their literal interpretation.

2. Examine the procedural misstep made by the petitioner, George Lord, after receiving the Notices of Violations. How did this action directly impact the judge’s ruling on his claim regarding A.R.S. § 33-1242?

3. Discuss the conflict between a unit owner’s right to lease their property and a condominium association’s right to enforce its governing documents, using the specific provisions of the CC&Rs (Sections 7.21 and 7.3) and state law (A.R.S. § 33-1260.01) as examples from the case.

4. Explain the distinction the judge made between the $300 potential fine mentioned in the Notice of Violations and the $250 attorney’s fee charged to the petitioner. How did this distinction relate to A.R.S. § 33-1260.01(E), and why was the Association’s action deemed permissible?

5. Evaluate the concept of an “itinerant population” as mentioned by the judge. How did Barrie Shepley’s business model contribute to this concern for the Association, and how did it ultimately weigh into the judge’s decision to dismiss the petition?

——————————————————————————–

Glossary of Key Terms

Term / Name

Definition

Administrative Law Judge (ALJ)

An official who presides over administrative hearings, weighs evidence, and makes legal rulings on disputes involving government agencies. In this case, Tammy L. Eigenheer.

A.R.S. (Arizona Revised Statutes)

The codified body of laws for the state of Arizona. The petitioner alleged violations of specific statutes within this code, namely A.R.S. § 33-1242 and § 33-1260.01.

A.R.S. § 33-1242

A state law governing the process for notifying a unit owner of a violation of condominium documents and the procedures for the owner to respond and contest the notice.

A.R.S. § 33-1260.01

A state law that places limitations on what information an association can require from a unit owner regarding a tenant and caps certain fees or penalties for incomplete information at $15.

Amenity

A feature or facility of a property that provides comfort, convenience, or pleasure. In this case, access to amenities was controlled by key cards, which the Association deactivated.

Barrie Shepley

The individual who leased three condominium units from the petitioner. He operated a fitness business, “Personal Best,” and used the units to house clients attending his training camps.

Covenants, Conditions, and Restrictions. These are the governing legal documents that set out the rules for a planned community or condominium. The Association alleged Shepley’s use of the units violated Sections 7.21 (leasing limitations) and 7.3 (business use limitations).

George E. Lord

The Petitioner in the case. He was the owner of multiple condominium units at The Boulders at La Reserve and filed the petition against the Association.

Itinerant population

A term used by the judge to describe a population of short-term, transient occupants. The judge concluded that the purpose of the Association’s rules was, in part, to prevent this type of occupancy.

Notice of Violations

A formal written document sent by the Association to the petitioner informing him of alleged violations of the governing documents and outlining potential consequences, such as fines.

Petitioner

The party who files a petition initiating a legal or administrative action. In this case, George E. Lord.

Preponderance of the evidence

The standard of proof required in this administrative hearing. It means that the petitioner had the burden of showing that the facts they sought to prove were “more probable than not.”

Respondent

The party against whom a petition is filed. In this case, The Boulders at La Reserve Condominium Association.

Subletting

The practice of a tenant leasing a rented property to a third party. The Association contended Shepley was subletting the units to his campers, while the petitioner argued they were merely guests.

The Boulders at La Reserve Condominium Association

The Respondent in the case. The homeowners’ association (HOA) responsible for governing the condominium community in Oro Valley, Arizona.






Blog Post – 19F-H1918013-REL


The $6,900 ‘Guest’ Mistake: 3 Hard Lessons from an HOA Lawsuit

A $6,900 loss in rental income and a losing legal battle with his HOA—all because of a dispute over the definition of a “guest.” This case between owner George Lord and The Boulders at La Reserve Condominium Association is a masterclass in how quickly and completely an owner can lose when they misinterpret the rules and underestimate an association’s power.

For any homeowner or landlord, this dispute provides three crucial lessons distilled from the administrative court’s decision. Understanding these precedents is essential before you ever find yourself at odds with your own HOA.

Lesson 1: The “Spirit of the Rule” Can Outweigh Your Clever Workaround

The dispute began when the property owner, Mr. Lord, leased three condos to Barrie Shepley, who ran fitness training camps. Mr. Shepley then used the condos to house his camp attendees, often for periods shorter than the HOA’s 30-day minimum lease term.

The owner argued his arrangement complied with the rules. He claimed his tenant, Mr. Shepley, was not subleasing the units; the attendees were merely “guests,” and therefore not subject to the 30-day minimum. It was a clever workaround, but it fell apart under scrutiny for two distinct reasons.

First, the judge looked past the “guest” label to the financial substance of the arrangement. A key piece of evidence was the camp’s pricing: the cost changed based on how many campers shared a condo ($950 each for four campers vs. $1299 each for two). The judge saw this as clear proof that housing was being paid for, making it a form of subletting.

Second, the judge found that the arrangement constituted a prohibited business activity. The association’s CC&Rs (Section 7.3) explicitly forbade any business activity that “involve[s] persons coming to the Unit.” Since the fitness camp required attendees to come to the condos for lodging, it was a direct violation. The judge’s decision was therefore not just based on a subjective interpretation, but was also grounded in a concrete rule violation.

The court looked at the “totality of the circumstances” to make its ruling, a point powerfully summarized in the final decision:

However, given the totality of the circumstances, the spirit and purpose of the applicable rules is to allow an association to know who is in the community and to prevent an itinerant population.

Pro Tip: Before implementing a workaround, ask yourself: “Does this honor the community’s stated goal?” If the answer is no, you’re on thin ice, even if you think you’ve found a loophole.

Lesson 2: You Must Follow Procedure to the Letter, Or You Forfeit Your Rights

Confident in his “guest” interpretation, the homeowner made his next critical error by underestimating the importance of legal procedure. He argued that the HOA’s initial “Notice of Violations” was invalid because it failed to cite the specific CC&R provision that had allegedly been violated.

This argument was swiftly dismissed due to a simple but fatal mistake: the owner never sent a formal written response to the notice by certified mail.

Under Arizona law (A.R.S. § 33-1242), an owner’s formal written response via certified mail triggers the HOA’s obligation to provide the specific provision that was violated. Without that trigger, the HOA’s duty to explain further is never activated. The homeowner failed to pull the trigger. Because he did not follow this exact procedure, his claim was thrown out, and the HOA had no further legal obligation to detail its case.

Analyst’s Takeaway: In a legal dispute, communication that isn’t sent via the officially mandated channel (like certified mail) is legally equivalent to communication that never happened.

Lesson 3: The HOA’s Legal Fees Can Hit Your Wallet Sooner Than You Think

Early in the dispute, the owner received a letter from the HOA’s legal counsel. The letter outlined the association’s position and included a charge for $250.00. This was not a fine for the violation. It was a fee for the lawyer’s time, as explained in the letter:

“As you know, the Association is entitled to recover its costs and attorneys’ fees from you, including $250.00 already incurred for the preparation of this letter.”

Many governing documents contain clauses that allow an HOA to recover its “costs of enforcement.” This letter was an enforcement action, and the legal fee was the cost. The judge found that nothing in the law or CC&Rs prohibited the HOA from immediately passing this expense to the owner.

This initial charge was a precursor to a much larger financial blow. As an enforcement tool for the violations discussed in Lesson 1, the HOA suspended the tenants’ access to community amenities. This pressure tactic worked perfectly. The tenant, Mr. Shepley, cancelled his leases due to the lack of amenity access, leading to the owner’s stated loss of $6,900 in rental fees.

Pro Tip: Assume your HOA’s first legal letter starts a running tab. Budget for legal costs from day one of a formal dispute, not just for potential fines.

Conclusion: Knowledge is Your Best Defense

The case of Lord vs. The Boulders at La Reserve establishes three clear precedents for owners: a rule’s intent can supersede its literal interpretation, procedural shortcuts void your rights, and the financial clock starts ticking the moment an HOA retains counsel.

This case is a firm reminder of an HOA’s power to enforce its rules, but it also highlights the owner’s responsibility to understand them. It begs the question: In our own communities, are we fully aware of the rules we’ve agreed to live by?


Case Participants

Petitioner Side

  • George E. Lord (petitioner)

Respondent Side

  • Maria Kupillas (respondent attorney)
    Law offices of Farley, Choate & Bergin
  • Danielle Morris (community manager)
    The Boulders at La Reserve Condominium Association

Neutral Parties

  • Tammy L. Eigenheer (ALJ)
  • Judy Lowe (ADRE Commissioner)
    Arizona Department of Real Estate
  • LDettorre (ADRE staff)
    Arizona Department of Real Estate
  • AHansen (ADRE staff)
    Arizona Department of Real Estate
  • djones (ADRE staff)
    Arizona Department of Real Estate
  • DGardner (ADRE staff)
    Arizona Department of Real Estate
  • ncano (ADRE staff)
    Arizona Department of Real Estate

Other Participants

  • Barrie Shepley (renter/key individual)

George E Lord vs. The Boulders at La Reserve Condominium Association

Posted on by

Case Summary

Case ID 19F-H1918013-REL
Agency ADRE
Tribunal OAH
Decision Date 2018-12-17
Administrative Law Judge Tammy L. Eigenheer
Outcome no
Filing Fees Refunded $0.00
Civil Penalties $0.00

Parties & Counsel

Petitioner George E Lord Counsel —
Respondent The Boulders at La Reserve Condominium Association Counsel Maria Kupillas

Alleged Violations

A.R.S. § 33-1242, A.R.S. § 33-1260.01, and CC&Rs

Outcome Summary

The Administrative Law Judge dismissed the Petition in its entirety, concluding that the Petitioner failed to establish by a preponderance of the evidence that the Respondent Condominium Association violated A.R.S. § 33-1242, A.R.S. § 33-1260.01, or the association's CC&Rs.

Why this result: Petitioner failed to establish a violation of any statute or covenant alleged. The core findings supported the HOA's position that the lessee was engaging in prohibited business activity and subletting, and that the charged attorney fees were permissible.

Key Issues & Findings

Alleged violations concerning notice procedures, leasing restrictions, prohibited business use, and excessive fees.

Petitioner alleged Respondent violated A.R.S. § 33-1242 by failing to include proper citations in violation notices, violated A.R.S. § 33-1260.01 and CC&Rs by imposing illegal restrictions on occupancy dates and prohibiting tenant guests, and violated fee limits under A.R.S. § 33-1260.01(E) by charging $250 in attorney fees.

Orders: The Petition was dismissed.

Filing fee: $0.00, Fee refunded: No

Disposition: petitioner_loss

Cited:

  • A.R.S. § 33-1242
  • A.R.S. § 33-1260.01
  • A.R.S. § 33-1258
  • A.A.C. R2-19-119
  • CC&Rs Section 7.21
  • CC&Rs Section 7.3

Analytics Highlights

Topics: condominium, HOA dispute, leasing restrictions, short-term rental, business use, notice procedure, attorney fees
Additional Citations:

  • A.R.S. § 33-1242
  • A.R.S. § 33-1260.01
  • A.R.S. § 33-1258
  • A.A.C. R2-19-119
  • CC&Rs Section 7.21
  • CC&Rs Section 7.3

Video Overview

Audio Overview

Decision Documents

19F-H1918013-REL Decision – 677039.pdf

Uploaded 2026-01-23T17:26:46 (115.9 KB)

19F-H1918013-REL Decision – 677040.pdf

Uploaded 2026-01-23T17:26:49 (47.9 KB)





Briefing Doc – 19F-H1918013-REL


Briefing Document: Lord v. The Boulders at La Reserve Condominium Association

Executive Summary

This document synthesizes the findings and conclusions from the Administrative Law Judge Decision in case number 19F-H1918013-REL, involving Petitioner George E. Lord and Respondent The Boulders at La Reserve Condominium Association. The judge ultimately dismissed all claims brought by the Petitioner, ruling that the Association acted within the bounds of Arizona statutes and its governing documents.

The core of the dispute centered on Mr. Lord’s leasing of three condominium units to an individual, Barrie Shepley, who used the properties to house participants for his commercial fitness training camps. The Association contended this arrangement constituted a prohibited short-term sublease and an improper business use of the units, leading them to suspend amenity access for the occupants.

The judge’s decision affirmed the Association’s position on all counts. Key takeaways include:

• Substance Over Form: The judge concluded that despite the absence of a formal sublease agreement, the nature of the arrangement—specifically a camp pricing structure that varied based on the number of occupants per condo—was effectively a sublet designed to house an “itinerant population,” contrary to the “spirit and purpose” of the community’s rules.

• Business Use Violation: The operation was found to be a business activity that violated the CC&Rs by requiring persons (camp participants) to come to the residential units.

• Procedural Compliance: The Association’s violation notices were deemed compliant with Arizona law. The judge noted that the statute only requires a detailed citation of the violated rule after the owner responds to the initial notice, which the Petitioner failed to do.

• Legality of Fees: A $250 charge levied by the Association’s counsel was determined to be a permissible charge for attorney’s fees related to potential collection, not an illegal penalty for leasing information as the Petitioner alleged.

As a result of these findings, the Petitioner’s request for relief was denied, and the petition was dismissed in its entirety.

I. Case Overview

• Parties:

◦ Petitioner: George E. Lord (unit owner)

◦ Respondent: The Boulders at La Reserve Condominium Association

• Case Number: 19F-H1918013-REL

• Venue: Arizona Office of Administrative Hearings

• Presiding Judge: Tammy L. Eigenheer, Administrative Law Judge

• Hearing Date: November 26, 2018

• Decision Date: December 17, 2018

• Final Disposition: The petition filed by George E. Lord was dismissed.

II. Factual Background and Timeline of Events

1. Lease Agreements: On or about December 4, 2017, Petitioner George Lord, through his management company, leased two units at The Boulders to Barrie Shepley for a term from March 7, 2018, to April 30, 2018. A third unit was subsequently leased to Mr. Shepley on or about January 15, 2018.

2. Commercial Use: Mr. Shepley operated a Canadian fitness business, “Personal Best,” which offered training camps in Tucson. Accommodations at The Boulders were included in the camp packages. The price for a camp varied based on occupancy:

◦ $950.00 each for four campers in a condo

◦ $1075.00 each for three campers in a condo

◦ $1299.00 each for two campers in a condo

3. Occupancy Begins: On March 7, 2018, guests of Mr. Shepley (camp participants) began arriving to occupy the three leased units.

4. Association Intervention: On March 9, 2018, Community Manager Danielle Morris emailed Mr. Lord, stating the Association’s belief that he was in violation of the CC&Rs by allowing subleasing for periods less than the 30-day minimum. Ms. Morris informed him that amenity access cards for the three units were deactivated.

5. Dispute Escalation: Mr. Lord contended that the occupants were merely “guests” of Mr. Shepley, not subletters. Ms. Morris countered that the Association required the names of all occupants and the duration of their stays, and that each occupant must stay for a minimum of 30 days.

6. Information Provided: On March 13, 2018, Mr. Lord provided the names of the occupants and their dates of occupancy, requesting that amenities be restored.

7. Violation Reiterated: On March 16, 2018, Ms. Morris stated the violation was ongoing, as occupants staying from March 7 to March 31 did not meet the 30-day minimum stay requirement.

8. Formal Notice of Violation: On March 18, 2018, Mr. Lord received formal Notices of Violations for the three units. The notices stated that amenity access was suspended because the HOA was not provided with the names of adult occupants and their timeframes. The notice warned that a $300 fine could be applied. Mr. Lord did not respond to these notices.

9. Attorney Involvement: On March 22, 2018, Mr. Lord received a letter from the Association’s legal counsel outlining its legal position and noting an amount due of $250 for attorney’s fees already incurred.

10. Lease Cancellation & Financial Loss: On April 2, 2018, Mr. Shepley cancelled the remainder of the leases due to the lack of amenities for his guests. Mr. Lord asserted a resulting financial loss of $6,900 in rental fees for April 2018.

11. Petition Filing: On August 31, 2018, Mr. Lord filed a petition with the Arizona Department of Real Estate, alleging the Association violated state statutes and its own CC&Rs.

III. Petitioner’s Allegations and Arguments

Mr. Lord’s petition was based on three primary allegations against the Association:

• Allegation 1: Defective Violation Notice (A.R.S. § 33-1242): The Petitioner argued that the Notices of Violations were legally deficient because they failed to cite the specific statute or CC&R provision that had allegedly been violated.

• Allegation 2: Unlawful Occupancy Requirements (A.R.S. § 33-1260.01 & CC&Rs): The Petitioner asserted that the Association overstepped its authority by demanding that each occupant, whom he characterized as a “guest” of the primary lessee, must stay for a minimum of 30 days. He argued the 30-day minimum lease term applied only to the primary lease with Mr. Shepley, not to the occupants.

• Allegation 3: Improper Fees (A.R.S. § 33-1260.01(E)): The Petitioner claimed that the $250 charge from the Association’s attorney constituted an illegal fee, penalty, or charge related to providing leasing information, which he argued was prohibited by statute.

IV. Administrative Law Judge’s Findings and Conclusions

The Administrative Law Judge found that the Petitioner failed to meet the burden of proof for any of his allegations and dismissed the petition. The judge’s reasoning is detailed below.

Finding 1: No Violation of A.R.S. § 33-1242 (Violation Notice)

The judge determined that the Association’s initial Notices of Violations were legally sufficient.

• Legal Reasoning: A.R.S. § 33-1242(C) requires an association to cite the specific provision of the condominium documents that has been violated. However, this obligation is only triggered after the unit owner sends a written response to the initial notice by certified mail.

• Factual Basis: The Petitioner admitted that he did not respond to the formal Notices of Violations he received.

• Conclusion: Because the Petitioner did not take the legally required step to trigger the Association’s duty to provide a specific citation, the Association did not violate the statute.

Finding 2: No Violation of A.R.S. § 33-1260.01 or CC&Rs (Leasing Rules)

The judge concluded that the Association was justified in its actions regarding the occupancy of the units.

• The Arrangement was a “Form” of Subletting: The judge ruled against the Petitioner’s argument that the occupants were merely “guests.” The fact that the price of the fitness camp changed based on how many people shared a unit was seen as evidence that Mr. Shepley was, in effect, subletting the units for his business.

• Prohibited Business Activity: The judge found that Mr. Shepley was operating a business from the units in a manner prohibited by Section 7.3 of the CC&Rs, which disallows business activity that “involve[s] persons coming to the Unit.”

• Spirit of the Law: The decision acknowledged that the specific facts of the case “falls between the cracks of the specific language of the statutes and the regulations.” However, the judge emphasized that the Association’s actions were consistent with the broader intent of its rules, stating, “given the totality of the circumstances, the spirit and purpose of the applicable rules is to allow an association to know who is in the community and to prevent an itinerant population.”

• Conclusion: The Petitioner failed to establish that the Association violated leasing statutes or its own CC&Rs.

Finding 3: No Violation of A.R.S. § 33-1260.01(E) (Fees)

The judge found that the $250 charge was not an illegal penalty.

• Nature of the Charge: The evidence showed that no fines for the lease policy violation had actually been assessed. The $250 charge was explicitly for attorney’s fees related to the potential collection of assessments.

• Legal Reasoning: The judge stated, “Nothing in the cited statute or the CC&Rs prohibits such a charge being implemented.” The fee was not a penalty for “incomplete or late information” as covered by the statute, but a charge for legal costs incurred by the Association.

• Conclusion: The Petitioner failed to establish a violation regarding the assessed fees.

V. Referenced Statutes and Governing Documents

Reference

Provision Summary

Relevance to Case

A.R.S. § 33-1242(B)&(C)

Outlines the process for a unit owner to respond to a violation notice and the association’s subsequent duty to provide specific details of the violation.

The judge found no violation because the Petitioner did not follow the procedure to trigger the association’s duty.

A.R.S. § 33-1260.01(C)

Limits the information an association can require about a tenant to names, contact info for adults, lease period, and vehicle information.

The Petitioner’s case rested on interpreting this statute; the judge found the Association’s inquiries justified by the unique circumstances.

A.R.S. § 33-1260.01(E)

Prohibits an association from imposing fees greater than $15 for incomplete or late leasing information.

The Petitioner argued the $250 attorney fee violated this, but the judge found it was a permissible charge for legal costs, not a penalty.

CC&R Section 7.21

Requires leases to be in writing, for a term of not less than 30 days, and requires owners to provide lessee names and lease dates.

The Association argued the arrangement violated the 30-day minimum stay rule for occupants, which the judge upheld in spirit.

CC&R Section 7.3

Prohibits business activities within a unit that involve persons coming to the unit.

The judge found Mr. Shepley’s fitness camp, which housed participants in the units, was a clear violation of this provision.

Leasing Policy

States a $300 fine may be imposed for violations of the 30-day minimum lease policy.

The Notice of Violation referenced this potential fine, though it was never actually assessed.

VI. Final Order and Procedural Notes

• Order: Based on the above findings, the Administrative Law Judge ordered that the Petition be dismissed.

• Binding Nature: The decision is binding on the parties unless a rehearing is granted. A request for rehearing must be filed with the Commissioner of the Department of Real Estate within 30 days of the service of the Order.

• Related Filings: On the same day the decision was issued, December 17, 2018, the court also issued a separate “Order Vacating Hearing,” likely a procedural filing to cancel a future hearing that was rendered unnecessary by the dismissal of the case.






Study Guide – 19F-H1918013-REL


Study Guide: Lord v. The Boulders at La Reserve Condominium Association

This study guide provides a detailed review of the administrative case No. 19F-H1918013-REL, heard by the Arizona Office of Administrative Hearings. The case involves a dispute between a condominium unit owner, George E. Lord, and his condominium association, The Boulders at La Reserve, concerning leasing policies, occupant regulations, and alleged statutory violations.

Short-Answer Quiz

Instructions: Answer the following questions in two to three complete sentences, based on the information provided in the source documents.

1. Who were the primary parties involved in this administrative hearing, and what were their respective roles?

2. Describe the business arrangement that Barrie Shepley, the petitioner’s lessee, was operating from the leased condominium units.

3. What was the first official action the Condominium Association’s management took in response to the arrival of Barrie Shepley’s guests, and what was their stated reason?

4. According to the Association, what two specific provisions of the governing documents were being violated by the petitioner and his lessee?

5. What was the petitioner’s central argument for why the occupants of the units were not in violation of the Association’s 30-day minimum stay requirement?

6. On what procedural grounds did the petitioner, George Lord, claim that the Association’s “Notice of Violations” was itself a violation of Arizona law (A.R.S. § 33-1242)?

7. Why did the Administrative Law Judge ultimately rule that the Association did not violate A.R.S. § 33-1242?

8. How did the judge interpret the fact that the price for Barrie Shepley’s fitness camps varied based on the number of people sharing a condo?

9. What financial loss did the petitioner claim to have suffered, and what was the direct cause of this loss?

10. What was the final ruling, or “Order,” issued by the Administrative Law Judge in this case?

——————————————————————————–

Answer Key

1. The primary parties were George E. Lord, the petitioner and owner of multiple condominium units, and The Boulders at La Reserve Condominium Association, the respondent and governing body for the community. The case was adjudicated by Administrative Law Judge Tammy L. Eigenheer.

2. Barrie Shepley operated a fitness business called “Personal Best” that offered training camps in the Tucson area. The price for these camps included accommodations at The Boulders, with the cost per person varying based on how many campers shared a condominium unit.

3. The Association’s first action was to deactivate the amenity access cards for the three units leased by Shepley. Danielle Morris, the Community Manager, stated this was due to a belief that the petitioner’s lessee was subleasing the units for periods of less than the 30-day minimum in violation of the CC&Rs.

4. The Association alleged violations of the CC&Rs related to subleasing for less than the 30-day minimum timeframe. The formal Notices of Violations also cited the failure to provide the names of all adult occupants and the timeframes of their stays to the HOA.

5. The petitioner argued that because his lessee, Mr. Shepley, was not charging a specific rental fee to the occupants, they were merely “guests” and not sub-lessees. Therefore, the 30-day minimum stay requirement applicable to leases did not apply to them.

6. The petitioner alleged that the Association’s failure to include a citation to the specific statute or CC&R provision that had allegedly been violated in the initial Notice of Violations was a violation of A.R.S. § 33-1242.

7. The judge ruled against the petitioner because A.R.S. § 33-1242 only requires an association to provide the specific provision violated after the unit owner sends a written response to the initial notice by certified mail. The petitioner admitted that he did not respond to the Notices of Violations.

8. The judge found that the tiered pricing structure supported the conclusion that Mr. Shepley was, “in a form, subletting the units.” The fact that the camp price decreased as more people shared a unit indicated that the occupants were paying for their accommodations, not simply staying as guests.

9. The petitioner asserted a financial loss of $6,900 in rental fees for April 2018. This loss was directly caused by Barrie Shepley canceling the remainder of his leases due to the lack of amenities for his occupants.

10. The Administrative Law Judge’s final order was that the Petition filed by George E. Lord be dismissed. This decision was binding unless a rehearing was granted.

——————————————————————————–

Essay Questions

Instructions: The following questions are designed to test a deeper, more analytical understanding of the case. Formulate a comprehensive response to each prompt, citing specific facts, arguments, and legal interpretations from the case file.

1. Analyze the Administrative Law Judge’s reasoning for concluding that Barrie Shepley was “in a form, subletting” the units. Discuss the evidence cited and the concept of the “spirit and purpose” of the rules versus their literal interpretation.

2. Examine the procedural misstep made by the petitioner, George Lord, after receiving the Notices of Violations. How did this action directly impact the judge’s ruling on his claim regarding A.R.S. § 33-1242?

3. Discuss the conflict between a unit owner’s right to lease their property and a condominium association’s right to enforce its governing documents, using the specific provisions of the CC&Rs (Sections 7.21 and 7.3) and state law (A.R.S. § 33-1260.01) as examples from the case.

4. Explain the distinction the judge made between the $300 potential fine mentioned in the Notice of Violations and the $250 attorney’s fee charged to the petitioner. How did this distinction relate to A.R.S. § 33-1260.01(E), and why was the Association’s action deemed permissible?

5. Evaluate the concept of an “itinerant population” as mentioned by the judge. How did Barrie Shepley’s business model contribute to this concern for the Association, and how did it ultimately weigh into the judge’s decision to dismiss the petition?

——————————————————————————–

Glossary of Key Terms

Term / Name

Definition

Administrative Law Judge (ALJ)

An official who presides over administrative hearings, weighs evidence, and makes legal rulings on disputes involving government agencies. In this case, Tammy L. Eigenheer.

A.R.S. (Arizona Revised Statutes)

The codified body of laws for the state of Arizona. The petitioner alleged violations of specific statutes within this code, namely A.R.S. § 33-1242 and § 33-1260.01.

A.R.S. § 33-1242

A state law governing the process for notifying a unit owner of a violation of condominium documents and the procedures for the owner to respond and contest the notice.

A.R.S. § 33-1260.01

A state law that places limitations on what information an association can require from a unit owner regarding a tenant and caps certain fees or penalties for incomplete information at $15.

Amenity

A feature or facility of a property that provides comfort, convenience, or pleasure. In this case, access to amenities was controlled by key cards, which the Association deactivated.

Barrie Shepley

The individual who leased three condominium units from the petitioner. He operated a fitness business, “Personal Best,” and used the units to house clients attending his training camps.

Covenants, Conditions, and Restrictions. These are the governing legal documents that set out the rules for a planned community or condominium. The Association alleged Shepley’s use of the units violated Sections 7.21 (leasing limitations) and 7.3 (business use limitations).

George E. Lord

The Petitioner in the case. He was the owner of multiple condominium units at The Boulders at La Reserve and filed the petition against the Association.

Itinerant population

A term used by the judge to describe a population of short-term, transient occupants. The judge concluded that the purpose of the Association’s rules was, in part, to prevent this type of occupancy.

Notice of Violations

A formal written document sent by the Association to the petitioner informing him of alleged violations of the governing documents and outlining potential consequences, such as fines.

Petitioner

The party who files a petition initiating a legal or administrative action. In this case, George E. Lord.

Preponderance of the evidence

The standard of proof required in this administrative hearing. It means that the petitioner had the burden of showing that the facts they sought to prove were “more probable than not.”

Respondent

The party against whom a petition is filed. In this case, The Boulders at La Reserve Condominium Association.

Subletting

The practice of a tenant leasing a rented property to a third party. The Association contended Shepley was subletting the units to his campers, while the petitioner argued they were merely guests.

The Boulders at La Reserve Condominium Association

The Respondent in the case. The homeowners’ association (HOA) responsible for governing the condominium community in Oro Valley, Arizona.






Blog Post – 19F-H1918013-REL


The $6,900 ‘Guest’ Mistake: 3 Hard Lessons from an HOA Lawsuit

A $6,900 loss in rental income and a losing legal battle with his HOA—all because of a dispute over the definition of a “guest.” This case between owner George Lord and The Boulders at La Reserve Condominium Association is a masterclass in how quickly and completely an owner can lose when they misinterpret the rules and underestimate an association’s power.

For any homeowner or landlord, this dispute provides three crucial lessons distilled from the administrative court’s decision. Understanding these precedents is essential before you ever find yourself at odds with your own HOA.

Lesson 1: The “Spirit of the Rule” Can Outweigh Your Clever Workaround

The dispute began when the property owner, Mr. Lord, leased three condos to Barrie Shepley, who ran fitness training camps. Mr. Shepley then used the condos to house his camp attendees, often for periods shorter than the HOA’s 30-day minimum lease term.

The owner argued his arrangement complied with the rules. He claimed his tenant, Mr. Shepley, was not subleasing the units; the attendees were merely “guests,” and therefore not subject to the 30-day minimum. It was a clever workaround, but it fell apart under scrutiny for two distinct reasons.

First, the judge looked past the “guest” label to the financial substance of the arrangement. A key piece of evidence was the camp’s pricing: the cost changed based on how many campers shared a condo ($950 each for four campers vs. $1299 each for two). The judge saw this as clear proof that housing was being paid for, making it a form of subletting.

Second, the judge found that the arrangement constituted a prohibited business activity. The association’s CC&Rs (Section 7.3) explicitly forbade any business activity that “involve[s] persons coming to the Unit.” Since the fitness camp required attendees to come to the condos for lodging, it was a direct violation. The judge’s decision was therefore not just based on a subjective interpretation, but was also grounded in a concrete rule violation.

The court looked at the “totality of the circumstances” to make its ruling, a point powerfully summarized in the final decision:

However, given the totality of the circumstances, the spirit and purpose of the applicable rules is to allow an association to know who is in the community and to prevent an itinerant population.

Pro Tip: Before implementing a workaround, ask yourself: “Does this honor the community’s stated goal?” If the answer is no, you’re on thin ice, even if you think you’ve found a loophole.

Lesson 2: You Must Follow Procedure to the Letter, Or You Forfeit Your Rights

Confident in his “guest” interpretation, the homeowner made his next critical error by underestimating the importance of legal procedure. He argued that the HOA’s initial “Notice of Violations” was invalid because it failed to cite the specific CC&R provision that had allegedly been violated.

This argument was swiftly dismissed due to a simple but fatal mistake: the owner never sent a formal written response to the notice by certified mail.

Under Arizona law (A.R.S. § 33-1242), an owner’s formal written response via certified mail triggers the HOA’s obligation to provide the specific provision that was violated. Without that trigger, the HOA’s duty to explain further is never activated. The homeowner failed to pull the trigger. Because he did not follow this exact procedure, his claim was thrown out, and the HOA had no further legal obligation to detail its case.

Analyst’s Takeaway: In a legal dispute, communication that isn’t sent via the officially mandated channel (like certified mail) is legally equivalent to communication that never happened.

Lesson 3: The HOA’s Legal Fees Can Hit Your Wallet Sooner Than You Think

Early in the dispute, the owner received a letter from the HOA’s legal counsel. The letter outlined the association’s position and included a charge for $250.00. This was not a fine for the violation. It was a fee for the lawyer’s time, as explained in the letter:

“As you know, the Association is entitled to recover its costs and attorneys’ fees from you, including $250.00 already incurred for the preparation of this letter.”

Many governing documents contain clauses that allow an HOA to recover its “costs of enforcement.” This letter was an enforcement action, and the legal fee was the cost. The judge found that nothing in the law or CC&Rs prohibited the HOA from immediately passing this expense to the owner.

This initial charge was a precursor to a much larger financial blow. As an enforcement tool for the violations discussed in Lesson 1, the HOA suspended the tenants’ access to community amenities. This pressure tactic worked perfectly. The tenant, Mr. Shepley, cancelled his leases due to the lack of amenity access, leading to the owner’s stated loss of $6,900 in rental fees.

Pro Tip: Assume your HOA’s first legal letter starts a running tab. Budget for legal costs from day one of a formal dispute, not just for potential fines.

Conclusion: Knowledge is Your Best Defense

The case of Lord vs. The Boulders at La Reserve establishes three clear precedents for owners: a rule’s intent can supersede its literal interpretation, procedural shortcuts void your rights, and the financial clock starts ticking the moment an HOA retains counsel.

This case is a firm reminder of an HOA’s power to enforce its rules, but it also highlights the owner’s responsibility to understand them. It begs the question: In our own communities, are we fully aware of the rules we’ve agreed to live by?


Case Participants

Petitioner Side

  • George E. Lord (petitioner)

Respondent Side

  • Maria Kupillas (respondent attorney)
    Law offices of Farley, Choate & Bergin
  • Danielle Morris (community manager)
    The Boulders at La Reserve Condominium Association

Neutral Parties

  • Tammy L. Eigenheer (ALJ)
  • Judy Lowe (ADRE Commissioner)
    Arizona Department of Real Estate
  • LDettorre (ADRE staff)
    Arizona Department of Real Estate
  • AHansen (ADRE staff)
    Arizona Department of Real Estate
  • djones (ADRE staff)
    Arizona Department of Real Estate
  • DGardner (ADRE staff)
    Arizona Department of Real Estate
  • ncano (ADRE staff)
    Arizona Department of Real Estate

Other Participants

  • Barrie Shepley (renter/key individual)